Would a wealth tax in Philadelphia unintentionally hurt our middle class?
We are still 18 months from the election of a new mayor and municipal Council, but silly season is already upon us. Believe me, the fingertip shenanigans and calculations have already begun.
Over the past few weeks, we’ve seen many potential candidates trying to come out on top on signing questions. We saw it in Councilman Derek Green’s mistake push for a public bankas well as Councilor Allan Domb’s proposal to pass term limits— although he didn’t tell Board Chairman Darrell Clarke or some of his colleagues beforehand. The race is on to grab a title, any title, rather than do something. As the election approaches, the messages seem to beat the politics every time.
The latest example of this rambling trend came this week, when the Council’s progressive triumvirate, Kendra Brooks, Helen Gym and Jamie Gauthier, were joined by Senator Elizabeth Warren propose a wealth tax for Philadelphia. Brooks’ proposal would tax the value of direct holdings of stocks and bonds at a maximum rate of 0.4%. The top 5% of families with incomes of $364,000 or more would account for nearly three-quarters of the projected $200 million in income.
If Brooks, Gym and Gauthier were serious about uplifting working-class people, they would move beyond the politics of class resentment and instead form a problem-solving coalition to invest in building a middle class.
According to Brooks, the money generated from the tax would go to mobile crisis response units, libraries, homeless services and recreation centers. We’ll see if that spending does enough to fight inequality – which one might think would be the point of such a levy – but for now, let’s focus on the wisdom, or lack thereof, of pushing a another tax in the most taxed city in the country this side of Bridgeport, Connecticut.
It’s unclear what problem Brooks thinks he’s solving, but the proposal’s message has provided plenty of opportunities to divide the city into “us” and “them.” “It’s time for the ultra-rich and the 1% to pay what they owe Philadelphia,” Brooks said at the press conference.
Playing on the populist resentment of the wealthy is smart policy, as Warren and Senator Bernie Sanders have proven. But the facts on the ground in Philadelphia don’t quite add up, as we’ve covered before. Philly doesn’t have the wealth that Brooks, Gym and Gauthier think it has. In a city with 400,000 of our fellow citizens poor and a shortage of corporate headquarters – our two biggest employers are the city itself and the University of Pennsylvania, which pay no taxes – where is all that wealth you going to tax? The website taxtherichphl.org actually names names, but – and lo and behold – most of them live outside from Philadelphia: Jeffrey Lurie, David Paul and Michael Rubin, for example.
Before we get to the point that Brooks’ proposal would actually hurt the middle class she thinks is helping, let’s face this: if the goal is to narrow the gap between the haves and have-nots in Philly, you don’t get no argument from me on this. destination. A devastating report, The National Equity Atlas was released just before the pandemic and the murder of George Floyd by PolicyLink and the Equity Research Institute, and it showed how cities are mired in systemic and growing inequalities.
“The architects of the Atlas say the data all point to the same conclusion: Growth alone won’t eliminate racial disparities. No city in the country, however prosperous, is distinguished by both rapid growth and effective racial integration,” wrote Ron Brownstein of the Atlantic at the time.
So the stakes are high. But doubling down on our city’s original tax sin — taxing what can go up and moving, like we do with one of the highest payroll taxes in the country — does it make sense? It makes perfect sense, after all, to support President Biden billionaire tax proposal and to see Brooks’ proposal as reckless, as it is far easier and more common to move your residence and/or business to Bala Cynwyd from Philly than to flee to Canada.
“There are a lot of very honorable people with laudable intentions who want to increase spending in certain areas of the city – especially for the disadvantaged – and they turn to taxes for this reason,” said Richard Vague, secretary of State to Banking and Securities and perhaps the most knowledgeable citizen in Philadelphia on the subject of taxes and inclusive growth, when I asked him about Brooks’ proposal yesterday. “But it happens to be a proposal that would backfire, perhaps more than any other that could be put forward. It would result in a mass departure of individuals from within the city – not just a threat of departure but a veritable exodus over a very short number of years – and would decimate the city’s tax base.
It’s a doomsday scenario, especially at a time when, we have just learned, there is already a significant exodus of the current city. Don’t Believe Me or Wave? I do not know either, whiny, and it is too plutocratic? How about hearing from Jabari Jones, the President of Change Agent of the West Philadelphia Corridor Collaborative?
In a statement yesterday, he called the Brooks, Gym and Gauthier proposal “another example of well-intentioned policy that, in practice, would be disastrous for Philadelphia… In practice, the tax would incentivize wealthy individuals to change their permanent addresses to outside addresses. of the City, avoiding Wealth Tax and circumventing the current taxes they pay that fund essential City services. This will cause banks and financial institutions to reconsider their presence in the City (as was the case in 1997 when Philadelphia repealed the tax), which will disproportionately affect black and brown families in neighborhoods that already have access limited to financial services.
What Vague and Jones know is that almost every time a wealth tax has been attempted, it has failed. In Europe, countries including France have stopped trying to tax wealth because it is difficult to measure and virtually impossible to administer. Either the ultra-rich will pay their accountants to find ways around the tax, or they will get up and move on. So do you trust that this will the municipal administration be able to administer such a tax?
Keep in mind that the IRS does not track unrealized gains on stocks and bonds. Remember Rob Dubow, the city’s chief financial officer who lost millions of taxpayer dollars and didn’t even reconcile the city’s bank accounts for seven years? Do you agree with this a guy who goes on a wild auditing spree of average Philadelphians, trying to figure out who owes what? (I contacted Brooks yesterday to find out how the tax would be administered, but haven’t heard back.)
And, review: Do we even need money? Interestingly, Mayor Kenney released his new budget proposal yesterday: a whopping $5.6 billion. Let’s put this in context. Six years ago, Kenney inherited from Mayor Michael Nutter a budget of $3.8 billion. This represents an increase of almost 50% in expenses. To have you seen a return on this investment? We may not have a revenue problem; maybe we have a smart spending problem.
After all, are you convinced that raising taxes on those who can easily move house and then using that money to invest in libraries, homeless services and recreation centers – worthy causes, all – will do anything to reduce the gaps that exist between our city’s haves and have-nots? Forget for a moment the wisdom behind enacting a wealth tax. Consider this: supporters of this one didn’t even understand what these funds would be used for for.
Again, there are proven strategies cities are using to focus on our growing revenues and wealth gaps. Call me a sentimentalist, but I still miss the days when sane Democrats and Republicans pushed for policies that build a middle class — good schools, jobs with benefits, access to mortgages; home ownership remains the best way to a rich and comfortable life. Sometimes we need new and innovative policies to achieve these goals, like in Boston, which is rapidly improving living standards for low-income workers by launching worker cooperatives. But to claim that the “tax the rich” shibboleth – or other campaign-inspired slogans – are in fact examples of problem-solving politics is dishonest from the start.
What Vague and Jones know is that almost every time a wealth tax has been attempted, it has failed. Either the ultra-rich will pay their accountants to find ways around the tax, or they will get up and move on.
Look at it this way. It would have been cool if Brooks, Gym and Gauthier had taken advantage of the giant hole The demise of Jim Kenney’s leadership left and assembled a cross section of city leaders – people from business, politics, nonprofit, civic and activist sectors – and developed a comprehensive strategy, with buy-in from all stakeholders. Now this would be the direction.
That’s what Charlotte Mayor Vi Lyles did when, following George Floydshe set up”The Mayor’s Racial Equity Initiativea $250 million public/private partnership to advance racial equity, with goals and timelines. Admittedly, it got off to a rocky start, after it emerged the woman hired to lead the initiative faced serious accusations of mismanagement at her last gig and was forced to resign. Regardless of how Lyles implemented his plan, the fact remains: he East a map. Do we have a plan other than to impose?
If Brooks, Gym and Gauthier were serious about uplifting working-class people, they would move beyond the politics of class resentment and instead form a problem-solving coalition to invest in building a middle class. There was a time when it was the calling card of Democrats, in this city and across the country.
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Header photo of (LR) Kendra Brooks, Helen Gym and Jamie Gauthier by Jared Piper/Philadelphia City Council